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December 15th 2005

China may widen trading band on Yuan

In theory, the Chinese Yuan can fluctuate (read appreciate) by .3% per day. In reality, the Central Bank allows the currency to appreciate by less than .01% per day, which has limited the Yuan’s net appreciation against the USD to only .4% since the 2.1% revaluation in July. As a result, the G8 governments are clamoring with renewed vigor for China to further revalue. In fact, a rumor has been circulating that China will widen the Yuan’s daily trading bands to 1%, which would enable the currency to appreciate faster. Many analysts expect the Central Bank to announce such a move before the Chinese New Year on January 29th. Bloomberg News reports:

“Given the track record of the Chinese government preferring to announce key policy changes ahead of long holidays, it’s convenient for the market to anticipate the next key move on the renminbi could come in the later half of January,” said one analyst.

Read More: Currency Strategists: China to Let Yuan Gain Faster, UOB Says

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Posted by Adam Kritzer | in Chinese Yuan (RMB), Politics & Policy | 2 Comments »

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2 Comments of “China may widen trading band on Yuan”

  1. Trish Says:

    WoW! I like the blog, just so much infomation. Thanks!
    Anyway, I hold a CAUTIOUS attitude towards the widening of RMB trading band.
    Here is an interesting article I’ve found relating to this issue, on http://www.chinavestor.com , good source of info!
    Tuesday, December 13, 2005
    China’s yuan marks another post-reval record
    “The yuan, which was revalued by 2.1 percent on July 21 to 8.11 per dollar, has now appreciated a further 0.43 percent since the policy move. It ended at 8.0770 to the dollar on Monday.
    “‘The yuan just went from strength to strength today, due in part to comments from both the Chinese and the Americans and a weaker U.S. dollar,’ a Beijing-based dealer at a large Chinese bank said.
    “‘There was little sign the central bank was active in the market today.’
    “China’s central bank chief Zhou Xiaochuan said on Tuesday he did not see more pressure on the yuan to further appreciate next year if the country’s trade surplus shrinks.
    “Zhou on Monday also dismissed as nonsense speculation of a major shift in policy towards the yuan at the end of the year.
    “The yuan firmed last week in response to reports in German magazine WirtschaftsWoche that China was preparing to revalue the yuan against the dollar on Jan. 1.
    “Meanwhile, U.S. Under Secretary for International Affairs Timothy Adams said China should act on its pledge to make the currency regime more flexible.
    “U.S. manufacturers have long argued that the yuan is seriously undervalued and gives Chinese-made goods an unfair advantage on international markets.
    “On Tuesday, Yu Yongding, an adviser to China’s central bank, said domestic firms should get ready for a strengthening of the yuan in the next one to two years.”
    Also, China’s yuan edged up yesterday but capped by Christmas
    SHANGHAI, Dec 26 (Reuters) – China’s yuan closed slightly firmer at 8.0755 against the dollar on Monday, but dealers said movement was limited by holidays and a quiet dollar.

  2. online trading Says:

    Hopefully this rumor is true and China’s Yuan appreciates. The US trade gap is so bad right now that this would really be a big step in the right direction. Now if we can curb the oil thing…
    http://www.tradingtoday.com/27-china-yuan-exchange-rate

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